The Taxpayer First Act of 2019: Changes for the IRS & Taxpayers

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The Taxpayer First Act of 2019 was quietly signed into law by President Donald Trump in July. There were no profound, jarring changes to the tax code with this one. Rather, it was a step toward creating a kinder and gentler IRS. Congressional support for the bill was largely bipartisan.

The TFA reforms customer service and organizational structure within the IRS, and it addresses identity theft as well. All in all, taxpayers should like this one, except maybe for one provision.

A Kinder IRS

Yes, it’s difficult to imagine the words “kind” and “IRS” fitting together in the same sentence, but this is indeed the goal of the TFA. The law instructs the IRS to submit a new customer service plan to Congress within one year, by July 2020. The plan should include agent training and guidance in customer service issues.

IRS training for agents has been historically based on the tax code, and let’s face it – that’s intelligible to most taxpayers. The goal of this new training is to bridge the gap. In other words, agents should learn to speak English, not Tax.

We’ll see how this works out. The IRS might have one year to form the plan, but it has two years to put it into practice.

When You Owe and Can’t Pay

The Taxpayer First Act of 2019 provides taxpayers with a little stress relief when it comes to payment options. The offer in compromise rules have been relaxed a little. This is the process by which a taxpayer can ask the IRS to accept something less than the full amount of taxes owed because paying the full amount would cause undue financial hardship.

There’s an application fee for an OIC, and this can conceivably prevent those in dire financial straits from asking for this type of relief. The TFA automatically waives the fee for taxpayers whose adjusted gross incomes fall at or below 250% of the federal poverty level, and others can request that the fee be waived when they submit IRS Form 433-A – the information statement you must submit to request an OIC.

This new rule also applies to any upfront payments that might be due before the IRS will accept an OIC.

When You Have to Use a Credit Card

Maybe you’re out of cash, but your Mastercard is pretty healthy. It used to be that you could only pay your tax debt via credit card through a third-party processor. The TFA allows the IRS to now accept credit cards. For that matter, it can accept your debit card now, too, if you want to pay directly from your bank account. Both options come with a fee, of course, but the IRS is supposed to do its best to minimize them.

The Appeals Process

The IRS has always had an appeals process in place for taxpayers who believe that an agency decision is just plain wrong. The TFA tweaks this process.

Taxpayers have always been able to request an appeal, but the IRS can deny these requests. It must now provide a written statement as to how it reached its decision, and the taxpayer can appeal the decision as well. The IRS statement has to explain how the taxpayer can do so.

The TFA also requires that the Independent Office of Appeals must provide its case files to any taxpayer with an adjusted gross income of $400,000 or less, so they’ll know what they’re up against.

New Identity Theft Measures

The TFA enhances IRS efforts to protect taxpayers against identity theft. You’ll still be treated to a recording if you ever have to call the IRS and you’re inevitably placed on hold, but the recording will now notify you of all the latest tax scams, explain how to report one if you have reason to believe you’re a victim, and offer tips as to how you might prevent being victimized in the future.

The TFA also obligates the IRS to notify taxpayers if it has reason to believe they might be victims of identity theft, and to let taxpayers know what steps it’s taken in response to the situation. This includes letting taxpayers know if anyone has been criminally charged in the matter, as well as the thief’s identity, so the taxpayer can pursue civil court relief. Victims will be assigned a “single point of contact” within the IRS, someone assigned to handle the taxpayer’s case.

And you no longer have to be a victim of identity theft to get a protective IRS personal identification number for use in submitting information to the agency electronically. This program is now open to anyone.

Help With Misdirected Refunds

Nobody is going to argue that preparing a tax return can be an ordeal. You might finish, take a deep breath of relief, then set about tapping in your bank’s routing number and your account number so you can receive that long-awaited refund by direct deposit.

You would have been pretty much on your own to fix the situation in days past if you transposed numbers or otherwise goofed. The IRS has been limited in what it can do to retrieve your money if it goes to someone else’s account.

Read More: IRS Refund Problems

Not anymore, thanks to the TFA. The new law requires that the IRS implement procedures for assistance in these cases, including setting up a reporting mechanism for concerned taxpayers and getting such refunds back and transmitted to the proper recipient.

The Failure-to-File Penalty

Now for the bad news. You’re going to pay a bit more as a penalty for filing that tax return late or not at all. It used to be a minimum of $205, but the TFA ramped it up to $330.

Maybe you’re thinking that’s not too terribly bad, but a few new tax laws have taken effect since 2018. One of them, the SECURE Act, increased the minimum penalty again in December 2019. Now it’s set at $435.

This penalty aside, the TFA is really pretty taxpayer-friendly.

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About the Author

Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.